Correlation Between New Momentum and Overstockcom
Can any of the company-specific risk be diversified away by investing in both New Momentum and Overstockcom at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining New Momentum and Overstockcom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Momentum and Overstockcom, you can compare the effects of market volatilities on New Momentum and Overstockcom and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in New Momentum with a short position of Overstockcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Momentum and Overstockcom.
Diversification Opportunities for New Momentum and Overstockcom
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between New and Overstockcom is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding New Momentum and Overstockcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overstockcom and New Momentum is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on New Momentum are associated (or correlated) with Overstockcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overstockcom has no effect on the direction of New Momentum i.e., New Momentum and Overstockcom go up and down completely randomly.
Pair Corralation between New Momentum and Overstockcom
Given the investment horizon of 90 days New Momentum is expected to generate 1.43 times less return on investment than Overstockcom. In addition to that, New Momentum is 3.0 times more volatile than Overstockcom. It trades about 0.05 of its total potential returns per unit of risk. Overstockcom is currently generating about 0.21 per unit of volatility. If you would invest 2,184 in Overstockcom on August 31, 2024 and sell it today you would earn a total of 908.00 from holding Overstockcom or generate 41.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 8.56% |
| Values | Daily Returns |
New Momentum vs. Overstockcom
Performance |
| Timeline |
| New Momentum |
| Overstockcom |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
New Momentum and Overstockcom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Momentum and Overstockcom
The main advantage of trading using opposite New Momentum and Overstockcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Momentum position performs unexpectedly, Overstockcom can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Overstockcom will offset losses from the drop in Overstockcom's long position.| New Momentum vs. Booking Holdings | New Momentum vs. TripAdvisor | New Momentum vs. Airbnb Inc | New Momentum vs. Royal Caribbean Cruises |
| Overstockcom vs. Etsy Inc | Overstockcom vs. Chewy Inc | Overstockcom vs. PDD Holdings | Overstockcom vs. Sea |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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